Contemporary Banking Policies and the Fragility of the Nigerian Banking Sector
Abstract
Banking policies in the Nigerian banking industry are constantly being reformed in the bid not just to strengthen the industry but also to reposition the banking sector for global competitiveness. This paper sought to investigate if the recent bailout policy amongst other policies may have had an effect on bank’s fragility. The paper utilized the multinomial logistic model previously specified by Degrys, Elahi and Ponas (2013) to investigate the phenomenon in question. The hypothesis of the study was adopted from Brandao-Marques, Correa and Sapriza (2010) who had proposed that Government support to banks through the provision of explicit or implicit guarantees affects the willingness of banks to take on risks by reducing market discipline or by increasing charter value. The findings in this study established that banking soundness, economic climate and unresponsive bank management exacerbates bank fragility in Nigeria. The study recommended that corporate governance structure of banks should not only be seriously monitored but also be made to accommodate the risk-taking behavior of bank in line with Basel III accord.
Keywords
Nigeria
Contemporary bank policies
Bank fragility
Bailout
Multinomial logistic
model
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